Internal control and cash

Cash is the most liquid assets. It must be safeguarded. because Cash can be easily concealed and transported, bears no marks of ownership, and is universally valued and accepted. Risk of theft of cash is directly correlated to the accessibility of cash and cash records. Businesses address these problems through a system of internal control.

Required

1. Discuss generally what a system of internal control is designed to accomplish and identify general controls over cash that should be implemented.
2. Identify internal control procedures for cash receipts.
3. Identify internal control procedures for cash disbursements.

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4-column bank reconciliation

The accountant for the Goshen Company assembled the following data:



The bank statements and the company's cash records show these totals:



Prepare a 4-column bank reconciliation as of July 31, using the form that reconciles both the book and bank balances to a correct cash amount.

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Bank reconciliation: Using the format of reconciling bank and depositor figures to corrected cash balance

The Eric Manufacturing Company received its bank statement for the month ending May 31. The bank statement indicates a balance of $32,400. The cash account as of the close of business on M31 has a balance of $8,350. In reconciling the balances, the following items are discovered.

(a) Collection by bank of note for $1,500 less collection fees of $250.
(b) Deposits in transit, $51,000.
(c) The bank charged the depositor $800 for overdrafts.
(d) Checks outstanding on May 31, $79,100.
(e) A canceled check issued to Scott Corp. for $4,500 was not recorded on Eric Company's books.

Prepare a bank reconciliation statement. (Use the format of reconciling bank and depositor figures to corrected cash balance.)

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Bank reconciliation: Using the form reconciling bank and book balances to the correct cash balance

The books of Steve's Service, Inc. disclosed a cash balance of $68,757 on June 30. The bank statement as of June 30 showed a balance of $54,780. Additional information that might be useful in reconciling the two balances follows:

(a) Check number 748 for $3,000 was originally recorded on the books as $4,500.
(b) A customer's note dated March 25 was discounted on April 12. The note was dishonored on June 29 (maturity date). The bank charged Steve's account for $14,265, including a protest fee of $42.
(c) The deposit of June 24 was recorded on the books as $2,895, but it was actually a deposit of $2,700.
(d) Outstanding checks totaled $9,885 as of June 30.
(e) There were bank service charges for June of $210 not yet recorded on the books.
(f) Steve's account had been charged on June 26 for a customer's NSF check for $1,296.
(g) Steve properly deposited $600 on June 3 that was not recorded by the bank.
(h) Receipts of June 30 for $13,425 were recorded by the bank on July 2.
(i) A bank memo stated that a customer's note for $4,500 and interest of $165 had been collected on June 27, and the bank charged a $36 collection fee.

Prepare a bank reconciliation statement, using the form reconciling bank and book balances to the correct cash balance.

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Bank reconciliation: Computing cash balance per books

The information below is from the books of the Seminole Corporation on June 30:

Assuming no errors were made, compute the cash balance per books on June 30 before any reconciliation adjustments.

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Bank reconciliation

Adcock Plastics Company deposits all receipts and makes all payments by check. The following information is available from the cash records:

Instructions
(a) Calculate the amount of the April 30:

1. Deposits in transit
2. Outstanding checks

(b) What is the April 30 adjusted cash balance? Show all work.

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